The 27-year-old from Perth will also be the first elected representative to wear a hijab.
The Australian Electoral Commission confirmed Ms Payman's win on Monday, which also marked World Refugee Day.
Having picked up three Senate seats in Western Australia at the election, the government will have 26 seats in the upper house, requiring one minor party or independent vote on top of the Greens' 12 votes to pass legislation.
The senator-elect will be one of three Muslim Australians in the Labor government, alongside Ed Husic and Anne Aly in the lower house.
The win fulfils Ms Payman's goal to be the first hijab-wearing parliamentarian.
It's an important message she says shows Australian diversity and the strength in unity.
Ms Payman's journey to the upper house was inspired by her father, who travelled to Australia by boat in 1999 from Afghanistan after fleeing the Taliban.
After leaving immigration detention, he worked multiple jobs to save enough money and sponsor his family to join him in Australia.
When she was eight years old, Ms Payman, her mother and three younger siblings arrived in Australia.
Her father died from leukaemia, aged 47, in 2018.
As a former refugee, Ms Payman understands the struggles of people who have been separated from their families.
Temporary visa arrangements preventing refugees living in Australia from reuniting with family members is a policy area she wants to look into.
Greens senator Mehreen Faruqi congratulated Ms Payman on her election.
"Really great to have another Muslim woman join the Senate," she said on Twitter.
"Representation matters and I look forward to working with Fatima. Congratulations."
In a statement on Facebook, Ms Payman thanked people for their love and support.
"We did it!" she said.
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